Mortgage interest relief line softened by T&R minister

TREASURY and Resources could reconsider its position on scrapping mortgage interest relief if a review it will carry out on personal taxes, allowances and duties provides ‘compelling evidence’ against it, minister Gavin St Pier has said.

TREASURY and Resources could reconsider its position on scrapping mortgage interest relief if a review it will carry out on personal taxes, allowances and duties provides ‘compelling evidence’ against it, minister Gavin St Pier has said.

Deputy St Pier’s statement, issued late last night, backtracked on comments he made in an interview with the Guernsey Press, which appeared in yesterday’s edition.

In those comments, when asked to respond to Treasury board member Deputy Mark Dorey’s radio phone-in statement that the intention to phase out was simply ‘an idea’, Deputy St Pier said the board’s view was ‘settled’ on scrapping the relief.

But following a board meeting yesterday, which stretched into the evening, Deputy St Pier, pictured, attempted to ease concern over the department’s intentions.

He said the only proposition on the issue contained in the 2013 Budget would, if approved, see tax relief provided for interest payable on mortgages of up to £350,000 – down from £400,000. This would take effect from 1 January 2014.

Tulip

SteveyM

November 25, 2012 12:41 pm

This is not 'softening' or 'backtracking' at all and is exactly the same proposal just worded differently by the Guernsey Press.

Just because 'the 2013 budget' is only to reduce to £350,000, does not mean the 2014 budget will not further reduce to £300,000 and so on over the coming years until this figure hits 0, which I believe was the original intention.

a voter

November 21, 2012 12:43 pm

Your example / suggestion demonstrates exactly why even this small initial measure that T&R proposes to take with the drop from £400k to £350k could in itself be the wrong one and they might need to start at the other end to be fairer all round [and it might raise more money for them!]

The point is I do not think that the work has been done to really bottom out if it would be better to phase it out from the top down, bottom up, some other way or not at all.

This looks like an instinctive stab in the dark - which runs the risk of missing the target or worse still hitting the wrong target!

Rachel

November 23, 2012 1:18 pm

Agree that something like Peters idea could work.

An easier to implement option may be to cap it for property prices over say £600,000? This may be easier as you would not have the admin involved with the continual adjustment for changes in income or family circumstances.

Another option may be to cap the amount of years an individual is eligible for mortgage relief -say 10 years per person? This would provide great benefit to first home buyers which arguably are the ones who need it most.

a voter

November 21, 2012 12:35 pm

There is no basis to modify the MITR whatsoever without doing all the necessary work to underpin it - which the yet-to-happen 2013 review will hopefully address.

So to say, we may or may not continue down this path, we are not sure what the implications of this action will be, we are not sure how or if or when we will redistribute or spend this money saved but heh, it won't be so bad if we just do a little bit of this thing we have not really thought through yet.

We'll do the thinking bit AFTER we have taken the decision! Surely no Deputy would run their business like that?

What if in the review they find out that it would be more fair to remove MITR in some other way (or perish the thought, not at all!) - then the decision to wind it down from £400k to £350k will turn out in retrospect to have been flawed.

It is simply not good enough to try and say this is just a little change so bear with us whilst we try and work out the details after the event.

Be bold, admit this is a premature announcement, take it back to the drawing board and then come back to the public and the States of Deliberation with a complete proposal sometime next year.

Given that this proposed initial change is not effective until 2014 what on earth is the rush anyhow?

Running the island is not a game of monopoly - you cannot afford to get it wrong (however well intentioned your decisions may be).

Peter

November 21, 2012 1:59 pm

Yes you are correct; however the figures are only to get the point across. The public are correctly concerned about first time buyers. However there are the second time buyers, these are just as important to the house chain, who release first time buyer buildings but who are starting a family who have other financial commitments. If you cut off their options the housing market will crash leaving everyone in negative equity. At the end of the day, this is whole subject is poorly thought out and there are many other areas that could be addresses eg

a voter

November 21, 2012 1:56 pm

Could not agree more.

Surely that is not much to ask for?

Only make far reaching changes like this - that massively impact many directly or indirectly (as is heralded by the

resumption that MITR will be abolished) - AFTER specifying your policy objectives and then conducting a robust piece of work to look at all the issues and possible wider and longer term impacts of different possible solutions for implementing these policy objectives.

guernseyal

Well, it is as suspected, the grown ups (Mark Dorey) know what they are on about, and the wet behind the ears newbies (GSP) haven't the first idea.

Mark Dorey was saying all this on the Sunday phone in.

That is why our ministers should serve at least one term before being allowed to be let loose with more responsibility. I seem to remember people wondering if it was a good idea at the time - me too, and I rest my case.

Concerned

November 21, 2012 1:21 pm

Poorly thought through - there are so many issues that need to be taken into account and when they have been, there are so many ways such a proposal could potentially be implemented though the income tax system.

e.g. MITR could be an income related relief (as others have suggested)

e.g. MITR could be reduced on LOWER mortgages first (IF there is evidence that these are often held by those with larger disposable incomes) as some have suggested

The simplistic suggestion on the table now from T&R (to just drop the limit from £400k to £350k) is consistent with this issue being ill thought through and it is such a blunt instrument.

Everything points to this whole issue (including the proposed initial reduction to £350k) being addressed properly in the full review in 2013 when hopefully a balanced coherent suite of measures can be developed maybe involving some innovative approaches touching on the tax AND benefit systems.

Surely we want neither a tax nor benefit system that unfairly prejudices / assists the wrong people in the wrong way or drives the wrong behaviours at individual or business / market level. But this tinkering that is proposed is simply not good enough.

Please do this properly and do not rush into rash half-cooked potentially damaging decisions.

Calm down dear

November 21, 2012 3:10 pm

Firstly it appears that this whole decision process has been rushed.

Although it does appear sensible that this relief is gradually removed as it does obviously have an inflationary effect on house prices. But surely it must be phased out gradually, not in £50k chunks. Taking big chunks out of MIR will not allow the economy to absorb them in a manner that wont have a massive impact on people losing this relief.

Secondly its all very well suggesting means tests/income levels for the relief. But the actual whole system surrounding it will cost the same if not more for the Income Tax authority to implement and run.

Spartacus

Radical

November 21, 2012 5:38 pm

That is called back tracking but credit where it is due, that is as close to an apology for the mess they have made as we are likely to get, BUT T&R need to go the whole way and withdraw their proposal to reduce the limit from £400k to £350k as well.

I don't understand this obsession with income - income tax is calculated as a percentage of income, MIR relates to the amount of debt somebody is in - two different things. Somebody with a large mortgage has a lot less than somebody on states benefits, they have a large debt, therefore are they not more deserving of a benefit? The only party that loses out with MIR are renters who want to get on the housing ladder anyway and will then benefit from it, the other two parties (home owners without mortgages or those in states housing) are already well catered for frankly.

Voter

November 21, 2012 8:53 pm

Radical

I agree with everything you say and would add one thing - do you not think that renters benefit indirectly by more people buying or upsizing houses by virtue of and thanks to the MITR and so keeping some extra inflationary pressure out of the rental sector?

And how much would houses have to fall in value to offset the loss of MITR (especially if it were fully removed)?

So far as I can see from other posts one would need a ~20% fall to cancel out the removal.

Brave it would be to pursue that policy (and costly it could be to the public purse - higher mortgage repayments / negative equity) not to mention the personal misery for many.

Surely we do not want to discourage people from taking responsibility for their own (financial) future and make it too hard to be largely self supporting - e.g. by buying / retaining their own home.

If MITR helps keeps some people in their own home, proud and independent rather than giving up and looking for even more help from the State then that "unfair subsidy" might be money very well spent and possibly better value for money for the taxpayer than other options (like the current proposal).

This topic just seems really complicated and government shooting from the hip with half-thought ideas that are superficially appealing to some could cause us all lots of problems (apparently unforeseen by them, but more obvious to others).

Spartacus

November 21, 2012 9:13 pm

Radical

On the radio Gavin St Pier said sorry for any anxiety and distress caused due to poor communication.

Re income - If you have a mortgage of £350K it stands to reason that you have an income level which supports that level of debt. Banks will not lend otherwise. Banks calculate the disposable income and leave a margin for eventualities such as interest rate increases etc.

I'm therefore not convinced that someone on benefits has more disposable income than an average home owner unless the latter has taken on other debts too.

Live and let live

November 21, 2012 10:15 pm

Spartacus

You may be right on some of what you see in theory, but in the real world things are often more complex as there are so many variables.

Just to give a basic example:

Even if your supposition is correct and the bank lends with a certain margin for eventualities, what if that is used up by other unforeseen circumstances - like the biggest global meltdown in about 100 years?

What if a family has suffered other unforeseen personal circumstances?

Every case is different, but are you saying that if it is the case that some family who objectively speaking has done nothing reckless should end up by virtue of the reduction (and possible removal) of MITR losing their home or not being able to eat properly or suffer some other misery?

And if it is OK, what do you think may then happen?

They may become a much larger burden on the tax payer as they access benefits that they will then be entitled to.

Arguing abstractly on very narrow points of principle is all well and good but if you follow that to its logically end - without taking other things into account - you could end up designing a future that in practice costs us all a lot more (and not just in terms of money).

You might then wish - even though it was slightly troubling as regards principles and fairness in some respect or another - that you had allowed the original situation to persist, as although not beautiful or perfect, if it works it is not always a good idea to try and fix it (or improve it). Or you might decide to consider a broader range of issues and factors?

Your approach to life / finance / family values etc etc might work for some but I am not sure that you can apply this to everyone - each person / family has their own card of hands dealt to them and does not always end up in a simple text book situation, nice though that might be (at least for the purposes of your analysis).

bcb

Spartacus

November 22, 2012 6:29 am

Live and let live

Very good questions.

In reality I find things are much simpler than they seem and adhering to points of principle always makes a sound argument.

In relation to your arguments about home owners you need to consider whether your points make equal sense if you apply them to someone who is in rented accomodation, so using your example, should the family of tenants who have done nothing reckless, by virtue of lack of subsidy equivalent to MIR, end up suffering misery following global crisis and adverse circumstances?

The government has no obligation to facilitate a certain lifestyle (ie home ownership) but surely must be obliged to use communal resources to aleviate poverty and aim for health equity as a minimum standard for everyone, homeowner or not. Currently Guernsey government has failed to achieve this but has instead opted to facilitate the lifestyles. I simply don't see how this policy has benefited the island.

I'm not sure why you think my finance and family values might not be applicable to everyone?

Everyone knows to expect struggles and sacrifices when they take on commitments such as children and mortgages. Unless they are in a priviliged position to start with or manage to carve out a lucrative niche for themselves they need to to take these commitments extremely seriously as there will always be tough times and it is wrong to expect anyone else to help bail you out.

Spartacus

Live and let live

November 23, 2012 6:26 pm

Spartacus

Problem with black and white is that the world is colour. So whilst it might help as a primary filter sometimes, it is an inadequate approach in most cases.

It's like thinking in 1 dimension (or 2) when the world in 3+ dimensional. It's even like assuming the earth is flat when it is not. It might make things clearer in your mind, but often your answers based on this approach will not map correctly to the real live situation.

Other than that, black and white is fine.

As to the specifics, we need to start with a common base point.

On day zero person X has a rented house and person Y has a house they bought with loan (and get MITR).

Then there is global melt down (or whatever other event that adversely effects them). Person X suffers and person Y suffers.

Then government comes along and, without all the impacts being worked out, says:

In this case both X and Y suffer the same initial event and Y suffers a second one.

Interestingly, if the views of some, that may on analysis be right - I do not know - that removal of MITR will send more folk into rented, then not only will Y suffer directly from MITR removal but so might X as his / her rent goes up on the next renewal as a result of the MITR removal (an indirect effect).

So it could come to pass that your favoured idea hurts person (or family) Y and indirectly, but nonetheless tangibly, hurts person (family) X who you were apparently trying to not harm.

There are lots of other interactions and anomalies that might arise from MITR removal if that is the only measure taken and some of these might be counter-intuitive (or invisible in your 1 stage black and white analysis).

I think a problem could be that your black and white filter is removing so many vital elements of the relatively complex argument, that you could well end up with the wrong outcome on this occasion.

Rachel

November 24, 2012 10:29 pm

Give is a rest Spartacus, just because you don't share these concerns don't mean that they do not exist.

Shades of grey in everything we do - motorist who speeds 1mph over speed limit should not suffer the same consequence as one caught going over by say 20mph. I usually agree with most of what you say but in this thread you are being a little juvenile (maybe you are just having a stubborn day?). How easy would a weather forecasters job be if the only thing they had to say was sunny or not sunny? There is so much more to weather than that. Please keep commenting though, I like your comments and noones perfect eh? -unless you think they are either perfect or not? ;-)

My opinion (and it is just an opinion and won't please everyone!) is that it should stay for first home buyers only, only be available for 10years per person and capped to exclude higher priced properties. I'd like to see first home buyers who need it get a helping hand onto the ladder- if it can keep a few people off the states housing list it is probably worth it.

Taff

November 21, 2012 5:03 pm

But GStP has form.

He was very briefly the Chairman of Alderney Electricity and managed to increase the annual cost of Directors fees by £55,000, including a chunk for himself. Which costs every customer some £30 every year.

GstP failed to understand that previous fees had included technical advice, which the current directors cannot provide. I think it is called attention to detail - or not.

TED

November 21, 2012 5:57 pm

The way that house prices continue to go sky wards the housing market will kill itself as there simply will not be any first time buyers to start the chain as they will be priced out, even over here with the insane wages of some.

Rufus

Still not convinced

November 21, 2012 6:10 pm

The statement confirms the technically correct point that any future changes (post 2014 / £350,000)will be the subject of another vote of the States in 2014 budget debate or beyond, but does not change the declared presumption driving the T&R "mind".

Anyhow, aside that, there seems to be an implicit assumption that if a borrower has a "large" mortgage - in this case that means £350,000 or above - that they have the most disposable income or ability to absorb the additional cost and that they are the fairest target for the extra tax exposure.

That may be so, but is this backed up by evidence?

Several have commented - and it seems highly plausible - that many people with "lower" mortgages might earn high(er) salaries and have comparatively very high disposable incomes - e.g. mortgage 2/3 paid off, dropped to say £150,000, kids left home, no child care costs, bought house years ago and have loads of equity etc - and it may be that this group would on balance be much better able to absorb the extra tax from MITR reduction and so would be a much fairer target if some immediate change is required before a proper review is conducted?

How do we know what the actual position is?The level of information published does not enable these basic distinctions to be seen.

There appears to remain a lack of rigour or if there has been rigour, where is all the evidence to back up that this first next incremental step is the right one and that there is not a fairer, more effective step.

I think more evidence is necessary before the State dips it hands more into any tax payer's pockets in this way.

As several others have commented, it may be the right relief to remove over time in principle but that does not mean that the specific approach that T&R have adopted is the best or right one - it is always possible to go somewhere by the wrong route.

Why cling on to this proposal which is clearly scratching the surface with insignificant sums of money involved for government - it seems more like face-saving rather than good government decision-making?

Why not instead abandon this - to government trivial - tax measure and put the whole matter into the review. It does not seem that any good reason has been put forward for implementing a measure ahead of an imminent major review on essentially the same issue. It might be different if there was not to be a full tax / benefits review starting in a few weeks, but there is!

Go on, take a little brave pill and do a small u-turn now, you know it makes sense.

Then announce something concrete when you have an evidence-backed case to make.

Rachel

confused

November 21, 2012 6:49 pm

T&R Statement of today says:

"This proposition is the continuation of a policy established in 2008, following a decision of the States of Deliberation in June 2006, that "interest relief should only continue to be provided on principal private residences of a modest value"."

This would seem to be saying the government policy from 2006 is and remains to provide this tax relief for such residences "of MODEST VALUE".

In 2006 it was presumably considered by the States of Deliberation that MODEST VALUE was a house purchase that needed up to a £400,000 loan and so these benefit from tax interest relief under that policy.

If houses have gone down in value since 2006 or if interest rates are expected to be lower than 2006 into the future then there might be a case for resetting the loan limit to align with current MODEST VALUE.

If not, then there are two observations I think that we can make:

(1) the only way it would appear to be possible whilst remaining in line with the policy of the States of Deliberation from 2006 /8 and which still applies would be to either:

(a) to leave the limit where it is or maybe

(b) increase it to reflect what is now needed to fulfil that continuing policy.

or

(2)unless it can be shown that house prices have fallen or interest rates are going to reduce, then the proposed reduction from 400,000 to 350,000 would seem to be completely contrary to that continuing policy which T&R quote in support of the current proposal.

I have to say I am confused. I think the policy of the States as quoted by T&R would currently support either doing nothing or increasing the limit.

And presumably the policy can only be changed if there is a review / report which seems to be on the cards for next year, and which would have to be voted on.

Am I missing something or is T&R putting forward a proposition that is contrary to current policy of the States of Deliberation?

Borrower

Spartacus

November 22, 2012 9:26 am

confused

the policy you are referring to was set by the Sates of deliberation in 2006. The term "modest value" is highly subjective. The 2006 states assembly quantified this as a property of higher value than a £400K loan.

In Dec the proposal to lower this cap to £350K will be debated by the NEW States of deliberation and it will be up to them to reaffirm what the 2006 assembly decided or CHANGE policy and use new terminology as they see fit. They might decide a property costing in excess of £400K is not "modest value" at all and that the £350K cap on MIR is long overdue. We elected them on a mandate for change. Just saying.

Spartacus

November 22, 2012 2:27 pm

A voter

I gather there will be a public consultation as part of the review process.

It makes no difference to anyone really if the £350K proposal goes through, it's like a token gesture, a step in the right direction. So if I was a deputy I would probably just pander to the uproar and wait for the review to be done before agreeing to any changes.

However the point is, they are the States of deliberation and they are there to make policy and they can use whatever justification they like. They are not bound by any policy or reasoning which has gone before, or even any law for that matter.

A voter

I think there are established practices for changing major policies (or policies that have major impacts).

So unless and until the policy has changed - by a transparent proper process (such as under the tax review followed by States debate next year) - then it has to be respected.

What you seem to imply is that if there is failure to follow the policy in a small way that is fine. That is a bad precedent to set surely? A slippery slope?

Why not:

(i) review / change the policy

then

(ii) modify / remove the MITR in light of the NEW policy.

The point is there is no new policy and it does not seem that a short paragraph and absence of comprehensive data put the Deputies in a position to be able to meaningfully debate and possibly change this policy when they debate the budget in a few weeks.

It is clear that you are content with this particular change. It is perhaps worth pausing to reflect for a moment if the tables were turned and this was a proposal that you objected to - would you not want due process to be followed, or could we just say to you, it's only a little change, just lump it, we are going to do this even though there is a policy suggesting that we should not. You might, rightly, be concerned by such an approach.

Let's do this (and everything else) right:

Groundwork first, policy second, implementation third.

One does not normally start a race at the finish line in my experience.

Spartacus

November 22, 2012 5:12 pm

A voter

I believe this is fine as far as due process goes, it's in the billet, an amendment has gone in and unless it's retracted it will be debated. I don't see a failure in process here and if there was one I'm sure Matt Fallaize would have pointed it out.

I am in favour of a more equitable and needs based system so I am thinking of the greater good rather than my own circumstances.

A voter

A few words in a billet and a debate, however lengthy, although it is of course a process, is not automatically a robust proper process.

In this case we need a comprehensive new wide high level policy to replace the 2006 policy before tampering with MITR.

A debate on the MITR issue is like discussing the design of a doorknob when we don't know if we need a house or a bungalow. It is valid, but should come further down the line, surely?

Of course there is nothing to stop a choosing a doorknob and working back from that to figure out what kind of door it might look good on and then design the building and then hope it all fits. But to stretch this somewhat basic analogy, what would happen if we went for doors that did not need doorknobs when we got to the final design. The rushed unnecessary decision on a detail (the doorknob) would have turned out to have been pointless and wrong.

So to come back on point, if there is to be proper job done here, I would have thought that a policy would be voted on first and then much more work would be needed in order to convert that in to a set of joined up concrete actions across many areas including quite probably MITR.

One would might also presume that an informed debate on the policy (and then later on the detailed actions that could implement the new policy) would need provision of a wide range of up to date data, analysis of this, research of various options, evaluation of these, consultation with stakeholders and then a detailed paper written with a set of recommendations.

My impression is that most of these critical precursors remain to be done - some of it indeed may be in next year's promised review. The work that in my view needs to be done so that we can all be content that a proper process was followed and a good policy decided and a good set of actions identified will take months not days.

So yes, the States can always consider anything, but in this case it seems to being asked to look at a very specific point in a very important area, but the bigger picture policy context and necessary pre-work seems to be missing.

It is a process, but not the kind that I think should be applied here.

This was not the type of change that I had in mind coming from our new States.

I would like more rigour in the decisions made by our elected representatives / government, not less.

Then the decisions affecting directly or indirectly about 60,000 people are likely to be better, more joined up and possibly more enduring which would be better for us all in my view.

Worried Mum

November 21, 2012 7:19 pm

We really don't understand where the Minister is getting his "200 mortgage holders" estimate from. He doesn't seem to understand that it’s not just first time buyers who will be hit hard, its all middle income families with a mortgage of any amount. If he has to review this then perhaps he should look at NEW mortgages after 2014 but how can you stop relief on struggling families who don't receive any other financial support from the States, who are just making ends meet and have 10 to 25 years left to run on their mortgage commitments? If you have a £350k / £400k mortgage in Guernsey you are not rich, more likely both working really hard to own a family home and asking the States for nothing. Does he want tax payers to sell up and leave the Island? Who will pay for the annual RPI increases in the old persons pension if we do? When we are old there probably won't even be a State pension....so we'll be reliant on the value of our house! I also wonder how many of the 5 members of T & R actually have mortgages? I am so disappointed with this “proposal” and how out of touch these new States Members are. I voted for a new, professional States and indeed for Gavin……I actually feel guilty now and have felt worried about our finances since the Budget/ non Budget release on Friday.

Voter

November 21, 2012 9:53 pm

I am not surprised that many are worried, needlessly.

This is one of the problems of announcing far reaching (presumptive) proposals without doing all the homework.

Many people who ultimately may not need to be worried are in fact rightly worried because the whole issue - which touches on many people's largest outgoing and the roof over their head - is shrouded in so much uncertainty.

A case study in how not to approach such matters, maybe?

It is still not too late to withdraw the proposal, announce clearly that T&R board has an OPEN MIND on the matter before it embarks on the review and consultation and then take it from there.

What would be good to see and could stimulate debate is the overarching core objectives that T&R government are seeking to achieve in this area.

Abolishing MITR is not an objective, but a means to an end.

Do we know what all the key objectives are?

When they are clear all the possible options to achieve them can be evaluated.

Every option will have pros and cons and these will have to be carefully balanced across all stakeholders.

Then a sensible package of measures can be developed, consulted on, revised and then announced. (Presumably one vehicle for that is the tax review to be held next year?)

We need policies (and aligned specific measures beneath these) that can help ensure a sustainable economy, public services(including education, health, welfare and other benefits) - all of which consume large amounts of public money funded by a sustainable fair tax and contributions system.

This cannot probably be achieved on the fly in a piecemeal way like what we appear have seen in the past few days (or by seeking to prejudge an outcome of the upcoming tax / benefit review).

Enn`Ane

Dr Fred

I may have missed this point in the long list of comments, but what relief to rent payers get who can't afford, and have little chance of ever buying a property? None at all is the answer.

The real culprit in all of this is the States failing to control irrational and excessive house price inflation in our small island. It will be the ruin of us as our young people gradually leave for a more equitable life elsewhere, knowing that they will never be able to put down roots here.

Dani

November 23, 2012 12:55 pm

Mr St Pier agrees with you. He said why should the majority subsidize a minority? Well lets take the disabled on this island - they are a minority.. why should we help them? The answer is because we want to live in a society that is good for us all. A society is also much stronger together than lots of individuals on their own only looking out for ourselves. We must all however be happy with the arrangement in place.

The high income earners and wealthy have somethings to their benefit. There is no inheritance tax, capital gains tax or higher tax rates on their incomes. Their social security earnings are capped. They have a fairly all right time of it in Guernsey compared to other jurisdictions. I argue this is to our benefit but the fact is they still have it good comparatively.

The lower earners receive income support to help with their homes and all sorts of other needs. They already receive subsidies and benefits.

The people that shoulder this are those in the middle and lower middle or those just doing well enough not to receive help from the States. They pay for everyone. In a sense they contribute more proportionally than the rich person as their social security is not capped. The one thing they want is help on the property ladder. This is what they value. I say if that is what they value - it is important. They must be happy too with the agreement.

I would ask you to rephrase your original question and say why is there not more help for the rent payers who struggle to get their own property? Things like mortgage relief or small loans to get deposits together? Those working hard get what they want. They should be encouraged. Help to them would go a long way. Help should not be taken away but more given. So our young people don't leave like you say.

Spartacus

Dani

November 23, 2012 5:32 pm

Er

I want to help those on lower to middle incomes by helping them into homes!

There is not a monopoly on hardship and we must look at what is best for society as a whole.

What other subsidies are there for people on lower to middle incomes? None. I thought it was a subsidy as opposed to a perk? Or are we using words with connotations that suggest helping someone is a bad thing to do?

As I stated above they pay proportionally the most and what they want is to be able to get on the housing ladder. Arguably what is the point of them being part of the social contract if the basic requirement and request of affordable housing is not even regarded as a real concern by those in government.

I think it is fair they get some help too.

The current situation is people on lower to middle incomes are struggling to get on the housing ladder. They save for years while renting and for the vast majority they have to do it as a couple or it is impossible. They put off kids to make sure they can keep up with payments. MIR is of value to them. Any help as I suggest would be of value to them. This is what all the upset is about.

The people you say are in hardship are having a hard time too but are already receiving subsidies paid for by those also struggling as we would want them too so we live in a nice society. Nothing wrong with that. They get help with their homes. When they have kids they get bigger places, sometimes with gardens and car park spaces as we want a nice society where there is a good standard of living for all. We do not want inequality.

There is a strange overlap though here were those struggling paying rent endlessly for years do not have homes with gardens, cannot afford homes with more than two bedrooms. Its usually a flat in St P P with no parking space. If you look at the whole picture it seems fair they get a bit of help too so they can get their own homes as this is what they really want. Low to middle incomes.

People keep saying there is no incentive to work and keep trying. They are being ignored.

Since the announcement of the withdrawal of MIR it has been suggested people are only upset because they have a vested interest. This is a fallacy aimed to remove the value of their points which are not being heard.

Keeping MIR or redistributing it to help those get on the housing ladder or stay there in some other way would not effect the net position available for spending elsewhere. Removing it however does skew the equitable position further for the lower to middle earner to be in a worse position. This is what they are opposed too and they have valid reason.

Spartacus

People on low incomes suffering hardship still have to pay taxes. Whatever term you use, I believe it is wrong to help people on middle incomes using tax collected from people in hardship.

Affordable housing does not just mean house ownership but includes rental property.

The problem which has been identified as stated in the billet is lack of affordable rentals and that people who are renting and in hardship are not getting the subsidies they need, because there is no provision for them in the current system. Only those in social housing get helped and then those who have mortgages get helped. This urgently needs to be addressed.

If I was a first time buyer poised to get onto the first rung of the market I would not be disccouraged by the budget announcements, but would be slightly more prudent with my plans, which is no bad thing.

A Voter

November 23, 2012 5:11 pm

Spartacus

You do like to look at MITR in splendid isolation focussing on the middle class and overlooking all the problems that would flow from its removal, don't you?

It goes much wider and deeper and has several indirect effects as is well covered all over these threads although you choose to ignore most other aspects it would appear so that you can maintain your case.

MITR directly helps people who are NOT rich to buy a house when they would otherwise not be able to.

We know that the price of an average house requires for most a very large mortgage. They are not rich. Indeed on purchasing a first home, the disposable income of a couple / family for many will be less than those earning less (and quite possibly less than many who receive benefits and do not work). This group you so wish to see targeted, already pay for many things that others receive for free (whilst also funding those things through their taxes that the others get for nothing). So they are contributing significantly.

It helps enable families settle in long-term property without the threat of having to move house within a year or 2 at any point. Stability for the family unit is very important for society as a whole. We need to encourage home ownership, not attack it.

Yes the slightly better off are clearly receiving a government handout with MITR but then they are proportionality paying much more than the truly well off.

But they are probably receiving far less than many at the lower end of the scale, which is also right and proper.

So there are lots of subsidies and benefits and if we start to attack one (and the group that get it) on an almost adhoc knee jerk basis that is highly unlikely to lead to the best outcome for us all as a society / economy.

We need to take a look at the tax system and benefit system in the round.

Maybe we need to look at better regulation of the rented sector - to redress the balance between landlord and tenant. It appears that most people would say that the landlord has by far the stronger hand - that could easily be addressed if there was the will. That might do far more to help people in that group than to "attack" another. Let's be a tiny bit creative, maybe?

There could be many people who are enjoying a lifestyle who do not work that is better than those who do work (and are paying for the former). But that may or may not be the case - it all needs to be looked at doesn't it?

If we can find something fairer then let's move towards it in a measured manner that does not in itself cause other (possibly bigger) problems, whether financial or social.

If the big issue of the day is fairness, it needs to be looked at in the round. We can all point at one thing that is unfair and demand its removal - but that is a fragmented approach and will not lead to optimal outcomes - it is also an approach that will be very divisive for our community.

Would you not want to see evaluated the projected changes to house prices, the number of additional mortgage defaults and the full potential impacts (including costs to individuals and the public purse) BEFORE any measure like this is implemented or do you think it is better to just wing it and see what happens?

I think the States is often criticised for making poor decisions. The process being suggested here has the classic ingredients to lead to a poor decision (it may turn out to be good, but that would be by luck).

This perk you so dislike will doubtless disappear or be modified over time, but it has been around for a long time, is hardwired into many people's lives and the economy and it will need to be modified / phased out in a very careful manner, probably simultaneously with a raft of other tax / benefits / regulatory measures that all interlock and seek to achieve a well thought through set of objectives.

Let us not look at one tree in the woods, rather let us survey the whole forest and come up with holistic viable joined up measures.

This is a harder to do and is the opposite of using simplistic single point arguments as the basis of decision making.

It may have been alright to muddle along when times were good. We now need to be a little more sophisticated in how we move forward in these more challenging times and recognise that most things like this are not 1-dimensional, in my view.

Many of us are just arguing for a proper process - but we are not, like some appear to be doing, prejudging the outcome of that or any other process.

Ray

November 23, 2012 4:45 pm

Can anybody come up with a loose definition of the income which makes a person in Guernsey working class or middle class

I remember a TV programme where a young unemployed woman with a Council house told that old left wing Labour stalwart John Prescott ( now Baron Prescott of Kingston-Upon-Hull)that she was middle class as she didn't work

If 27K is said to be the median average income what would you need to be deemed middle class ... £35K ? ... 40K ? Do you have to show earnings of 80K per year to get a 5X mortgage of 400K ? Would that not put you into the 'rich' class?

Spartacus

November 23, 2012 5:14 pm

Ray

Great question and great anecdote.

I reckon if you can afford to buy your own home you are middle class.

For a one bed flat £150K you would need to raise say, £15K for fees & deposit. £27,000 at 5 times salary loan criteria would get you the balance of £135K. Therefore if you earn £27K, ie. around the median income, I would say you are middle class.

If you cannot afford this for any reason you are not middle class. I agree with what you suggest is "rich".

kevin

November 23, 2012 8:57 pm

Just been looking at our States members declared interests. The number of them who are landlords is really quite disturbing.

Why Deputy St. Pier's residence is held in trust I don't know , perhaps he will come on here and expain. There are one or two mind blowingly wealthy states members who, when you look at the things they are trying to push through, should hold their heads' in shame.

I advise everyone to look at declared interests of states members it is very revealing.

Noel

November 28, 2012 1:14 pm

BYE BYE Treasury board, you've just kissed any chance of being re elected good bye.

Now do the decent thing and go now.

If you can't come out with constructive solutions don't come out with this sort of ideal, get out of the way for someone else. Lousy solutions like this will hurt the next generation Perhaps we should hand over to them earlier rather than later.

A MOUSE ran out from underneath a bread-slicing machine while Environmental Health officers were inspecting Boulangerie Victor Hugo’s premises at Bouillon Lane, the Magistrate’s Court was told yesterday.